One would be forgiven if they only half-heartedly pledged their support to Boris Johnson after he stated that he would get Brexit done. So far, the bill has made it through parliament without a hitch and the 31st January 2020 was a celebratory moment…until Coronavirus.
Death tolls are rising throughout the world as countries fail to contain the spread. Our government is doing all it can to keep us safe and keep the economy going in rather trying times. Insidiously talks of further delays have crept up in the media of late and it would be for the UK to request an extension, not the European Union. The Daily Telegraph recently explained how Boris Johnson would be forced to seek an extension, quoting members of the European Research Group as a mean to suss out potential political opposition.
We have been here before folks. Remember when the Prime Minister promised us that we would be leaving on 31st October, only to request an extension. Boris Johnson has yet to convert his electoral base into fully fledged Conservative voters. Could he be on the verge of betraying them by extending the transition period? (As if the past three years were not bad enough).
The truth of the matter is
There is nothing stopping Britain from leaving the EU whilst opening doors to bilateral agreements with each country in Europe and abroad. It is a perceptive fallacy to pursue a deal with the European Union whilst keeping a foot in. Twenty-seven countries will defend their own interests so why not exploit this at our own advantage.
The current crisis is showing how un-united the European Union is: "The European entity which proclaims solidarity and supranational status is reverting to a collection of nation states, each desperately fighting for their own survival amid the Covid-19 pandemic" writes the Strategic Culture Foundation. No one will forgive the PM if he pursues an extension, meaning that he would be willing to give money to the defunct European Union instead of investing in his own citizens as the country faces one of its greatest crisis since the Second World War. As Winston Churchill said, "never let a good crisis go to waste" and this is exactly what the European Union is doing. Delay remains the EU's sole strategy. Who can blame them? It would mean more money into their coffers rather than ours.
EET or European Economic Trap
Several politicians as well as business figures will push for an extension and request closer ties with the European Union as the crisis spreads. The proactive approach of Rishi Sunak, Chancellor of the Exchequer, and Andrew Bailey, governor of the Bank of England, can seldom attract criticism. However, the crisis may inspire former remainers to pursue Brexit in Name Only, even though the EU's economic health is rather dire.
The European Central Bank's chief Christine Lagarde announced the launch of the Pandemic Emergency Purchase Programme (PEPP), worth 750bn euros. Attractive figures to zombie businesses looking for cheap money to keep their business afloat. One should remember that "all that glitters is not gold." This money will not be used to build hospitals or help towards the production of ventilators or masks for instance. Instead, this asset purchasing programme is geared towards bringing bond yields to managing levels i.e. the 10y Italian yield from 3% to 1.4%, only for it to climb back to 1.8%. "What is abundantly clear is that the EU has become a financially-driven cartel, not a human-centered federation of nations." (see full article here)
Hopes of a V-shaped recovery are fading as buyers fearful of a bull trap desert the market whilst others endeavour to avoid a margin call by devising an exit strategy. The increased volatility is making both central bankers and governments nervous as the debt bubble bursts.
In France, the government is thinking about buying stakes in its most strategic enterprises threatening to throw the government into further debts. Quarterly results from large European groups are unlikely to turn the tide as share redemption looms. In this context, Standard & Poor's International Developed Nation Sovereign CDS Index could become a leading indicator as the world enters a new paradigm. Several entities will use these COVID-led financial packages to promote debt as the new normal whilst markets continue to dive.
Back to the UK
The UK Prime Minister would do well to bear this in mind as he embarks in negotiations with a superstructure nearing dislocation. The European Central Bank's recent discourse about quantitative easing has had little effect on the market as the engulfing crisis demonstrate that when it comes to survival there is no unity as European countries close their borders to protect their respective citizens.
Time has come to be bold and creative, and not resort to techniques of yesteryears. This is Boris' Churchillian moment and he must demonstrate that he is not just the former Mayor who managed to get us through tough times, he must transform into the statesman he has always admired. We too can use the crisis at our advantage, not to weaken the European Union but to strengthen our ties with countries in Europe and abroad. After all our celebratory 50p coin does say: "Peace, prosperity and friendship with all nations," perhaps the United Kingdom must lead the way once the effects of this raging pandemic subside.